Q 11

a) this is a multi-product profit volume chart, where A represents breakeven

revenue when most profitable product is made first, and B is the multi-product
breakeven sales

b) i) when talking about service E it sells only 1000 units which is the least produced
comparatively, it has a contribution of $8 per unit which can be considered profitable.
However, it also incurs fixed cost of $4400 which is higher than fixed cost of service F
and G.
Service G is the average sold service out of the three and it also incurs comparatively
lower fixed cost. What cannot be ignored is that it has a negative contribution of $3 per
unit, which is not a beneficial project for BLG Co. Some benefits could be gained from
their contract of providing 500 units of G. furthermore, selling a service with negative
contribution is not a financially beneficial project, however, it is much better than paying
out financial penalties.
Service F is produced the most out of the three and has a positive contribution of $#
which is lower than service F. It is also budgeted to incur no fixed cost, which can
benefit BLG co with maximized contribution.

ii) Break even analysis looks at the fixed costs in relation to its contribution earned each
unit sold. Even though it is a simple estimate which can help manager analyse their
products, it has some limitations:
 it assumes that if multiple products/services are being sold, they are sold in a
constant mix, which can lead to inaccurate calculations.
 it assumes that costs can either fixed or variable. This cuts out the idea of having
semi-fixed or semi-variable products/services, which is unrealistic.
 it also assumes that fixed cost, variable cost per unit and selling price is always
constant, which is impractical.
 lastly, the assumption is that inventory levels are constant, this gives out the idea
that closing inventory does not exist.